Chapter_4-9_7th_Ed_

Chapter_4-9_7th_Ed_ - Pamplin, Inc. Chapter 4-9 (7th Ed.)...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Pamplin, Inc. Chapter 4-9 (7th Ed.) (a) Current Ratio = current assets/current liabilities Ratio 2009 6.00 2010 4.00 Acid-test Ratio = (cash + accounts receivable - inventory)/current liabilities 2009 3.25 2010 1.92 Inventory Turnover = COGS/inventory 2009 1.27 2010 1.36 Average Collection period = accounts receivable/daily credit sales 2009 136.88 2010 106.98 Debt ratio = total debt/total assets 2009 33.33% 2010 34.62% Times interest earned = operating income/interest 2009 5.00 2010 5.63 Fixed asset turnover = sales/fixed assets 2009 1.00 2010 1.04 Operating profit margin = operating income/sales 2009 20.83% 2010 24.83% Return on common equity = Net Income/common equity 2009 7.50% 2010 10.47% b. How liquid is the firm? Current and acid test ratios are bad and getting worse. Times interest earned ratio is bad and getting worse. Debt ration is getting a little higher (have more debt relatively). Collection period is bad but getting better. These would be warning flags to creditors. c. Are the managers generating an adequate operating profit on the firm's assets? Fixed asset turnover is ok and getting better. Operating profit margin in good. d, How is the firm financing its assets? Per the debt ratio, about 1/3 of capital is from debt. e. Are the managers generating a good return on equity? Per the return on common equity ration, the firm is now providing a 10.47% return which is 16.34% better than othe companies in the industry. Change Norm...
View Full Document

This note was uploaded on 09/30/2011 for the course FIN 350 taught by Professor Chen during the Spring '07 term at S.F. State.

Page1 / 12

Chapter_4-9_7th_Ed_ - Pamplin, Inc. Chapter 4-9 (7th Ed.)...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online